Funkadelic Squeeze. The Energy Report 04/28/2025

It does not matter if it is uptown or downtown, it is a trading funkadelic in petroleum markets. Conflicting stories and perception about what’s going to happen next is keeping the market in a trading funk as stocks and metals pulled back as we await headlines.  From trade wars to OPEC plus rumors of increased production and talk that U.S. oil producers plan to cut back production due to falling prices, which will significantly impact shale oil output. Despite the current market confusion, there is an emerging supply squeeze that is coming together. We expect U.S. inventories to decrease this week, with crude, gasoline, and distillate supplies each falling by 3 million barrels. This struggle for stability in supply levels has been ongoing.

Oil prices trade on both sides of unchanged remain unchanged amid market confusion about economic prospects and potential increases in OPEC supply. Headlines over the weekend, including threats by Israeli Prime Minister Netanyahu to destroy Iran’s nuclear facilities and reports of an explosion at Iran’s Shahid Rajaei port on the Strait of Hormuz, gave a slight boost to the market. The United States and Iran are reportedly making progress in discussions concerning Iran’s nuclear ambitions. Meanwhile, Israel has expressed readiness to take action but is currently being restrained by the United States, which prefers negotiation to prevent another conflict.

According to AP, “A massive explosion and fire occurred at a port in southern Iran on Saturday, linked to a shipment containing a chemical ingredient used to make missile propellant. The incident resulted in eight fatalities and approximately 750 injuries. However, there has been no official suggestion from Iran that the explosion was caused by an attack.”

Amid trade war concerns, China is increasing imports of oil and liquefied natural gas ahead of potential sanctions, aiming to secure affordable oil supplies. Kepler reported that China’s refineries processed the highest amount of oil in a year in March, while crude inventories also rose to their highest level in nearly three years due to increased imports. China’s surplus crude amounted to 1.74 million barrels per day (bpd) in March, the most since June 2023, based on calculations using official data. This shift to a significant surplus followed a rare draw on stockpiles in the first two months of the year, when oil imports were low due to higher prices at the time of cargo arrangements. Although China does not disclose volumes of crude flowing into or out of strategic and commercial stockpiles, estimates can be made by subtracting the amount of oil processed from the total crude available from imports and domestic production.

Refiners processed 14.85 million bpd in March, according to official data released on April 16, representing a 0.4% increase from the same month in 2024. Crude imports reached 12.11 million bpd in March, marking a 5% rise from the same month a year earlier and the highest since August 2023.

Bloomberg is reporting that China re-exported over 280,000 tons of liquefied natural gas in April, the highest monthly volume ever, according to Bloomberg’s ship-tracking data. This amount equals 7.7% of total imports for the month. The high re-export volume is due to weak domestic demand caused by a mild winter and robust inventories, plus higher prices abroad. Imports are set to fall this month, continuing a six-month slump. Although rare, China has increased re-exports since November, with volumes rising from the start of the year.

Javier Blas from Bloomberg is reporting that there is a : Massive — really, massive — electricity outage hits Spain, which large part of the country suffering blackouts (including Madrid and Barcelona). Data from Spain’s national grid shows a lost of >10 GW of demand, from ~26GW to ~12GW in a few seconds. Reason unknown. Stay tuned.

Natural gas is facing seasonal weakness. EBW reported another bearish EIA storage surprise on Thursday, causing the May contract to fall below $3.00/MMBtu. Late-season heating demand may drop by early May while pipeline maintenance might increase production.

• Appalachian spot gas prices, struggling to stay above $2.00/MMBtu, could weaken with declining regional heating demand, potentially leading to shut-ins in May.
•  LNG demand is decreasing seasonally as maintenance rises and air temperatures increase, with weekly demand down 0.9 Bcf/d.
•   Without Texas heat to boost early-summer cooling demand, generating bullish momentum may be difficult amid triple-digit weekly injections and low spot prices (National Average spot prices fell to $2.17 Friday). A technical relief rally as shorts take profits is expected within 7-10 days.

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Call Phil Flynn today to open your account at 888-264-5665 or email me at pflynn@pricegroup.com.